June 23, 2018

Kim Dotcom predicts US tariffs will drive cryptocurrency growth

The internet entrepreneur took to Twitter on Friday to make his predictions as trade tensions between the US and China, and the US and the EU intensified. EU retaliatory tariffs on several US products took effect on Friday.

READ MORE: Trump trade war a ‘symptom of paranoid delusions’ – Chinese media

“Trump is putting tariffs on international imports in an attempt to make up for the income deficit resulting from his tax cuts. It’s the largest theft in history,” Dotcom said, adding that the citizens of other countries were suffering as a result of the greed of America’s one percent.

“Foreign countries and their citizens are forced to pay for US tax cuts. But they call me a pirate. LOL,“ he wrote.

Dotcom, a staunch supporter of the cryptocurrency market, believes that current circumstances will facilitate further cryptocurrency growth. He often uses Twitter to encourage his followers to invest in Bitcoin, and he has also launched his own bitcoin-based payment system, Bitcache.

READ MORE: ‘Perfect cryptocurrency’: Kim Dotcom outlines plans for new universal money

Dotcom, who holds New Zealand residency, has been fighting extradition to the US since 2012 when the US Department of Justice closed down the operations of the video sharing site he founded, Megaupload. US authorities sought the arrest of Dotcom and his partners on charges of operating an organization dedicated to copyright infringement.

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Trump threatens 20% tariffs on all European cars coming into US

The warning comes two days after US Commerce Secretary Wilbur Ross said that the White House had not made any decision on whether to extend the tariffs which had recently been introduced on other European goods.

The US president’s tweet dragged down stocks of European automakers BMW, Volkswagen, Fiat Chrysler and Mercedes. Shares of American car companies Ford and General Motors also plunged following the threat, but have since bounced back.

The 20-percent tariff is slightly lower than the one the US president pledged to impose on foreign automakers earlier this year. In May, the White House was reportedly considering a 25 percent tax on cars imported from Canada, Japan, Mexico, Germany and South Korea.

Trump has repeatedly issued warnings to US trade partners across the world about reducing the trade deficit. It was one of the pledges he made during his presidential campaign. The US president has severely criticized America’s current trade imbalance with many nations, particularly China.

The auto tariffs are a part of a broader agenda by the White House. Trump has slammed US automakers for manufacturing vehicles abroad. Last year, the US president threatened domestic manufacturers with a 35 percent tariff on cars produced outside the US.

The latest threat comes amid escalating trade tensions between the US and its partners. Earlier this year, Trump slapped China, Russia, India, Japan and Turkey with levies on steel and aluminum. Last month, the measure was extended to include the EU, Canada and Mexico – American allies that had initially been exempted.

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Trump trade war a ‘symptom of paranoid delusions’ – Chinese media

“The woes the administration is inflicting on Chinese companies do not simply translate into boons for US enterprises and the US economy,” the state newspaper said in an editorial headlined “Protectionism symptom of paranoid delusions.”

China cuts US investments by 92% amid escalating trade war

The paper refers to research by Rhodium Group, which found that Chinese investment in the United States declined by 92 percent to $1.8 billion in the first five months of this year – its lowest level in seven years. “The fast-shrinking Chinese investment in the US reflects the damage being done to China-US-trade relations… by the trade crusade of Trump and his trade hawks,” it said.

According to the China Daily, the US is trying to preserve the global economic system, which is working to America’s benefit. “However, times have changed, and what they are doing now is folly given the global value chains that were primarily forged by the US for its advantage.”

The economic difficulties America is facing are a result of its aggressive trade policy, not China or other countries, according to the daily. “The travails of the US economy have been the result of the costly wars the US has pursued and the damage done by the greed and dubious practices exposed by the subprime crisis.”

On Monday, President Trump threatened to hit $200 billion of Chinese imports with 10-percent tariffs if Beijing retaliates against the initial $50 billion in levies that the US imposed on Chinese goods.

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Germany makes €3 billion from Greece’s financial crisis

“Greek debt is sustainable going forward,” Eurogroup President Mario Centeno told journalists. “This is it, we have managed to deliver a soft landing of this long and difficult adjustment. There will be no follow-up program in Greece.”

The agreement grants Greece a 10-year extension to repay €96.9 billion worth of loans covering roughly half of Europe’s financial aid to Athens since 2010. The deal also defers interest payments and amortizations for another 10 years, until 2033.

Death and taxes: In ruins of Greek economy unpaid debt more than half of GDP

Greece will also receive an additional €15 billion on repayment of some more-expensive IMF loans, as well as to create a cash buffer so that it could meet financing needs in the next two years.

The deals sealed as part of the financial aid to Greece over the past eight years will give Germany, the EU’s biggest economy, some €2.9 billion. The profit emerged from interest rates through purchases of Greek government bonds under the Securities Markets Program (SMP) of the European Central Bank (ECB).

Under the SMP deals, all the profits received from buying the Greek securities by other states should be transferred to Greece in case Athens manages to meet all the austerity and reform requirements.

By 2017, the Bundesbank reportedly earned around €3.4 billion in interest gains from the SMP purchases. However, only in 2013 and 2014 these funds were transferred to Athens and the ESM, the federal government says. For the last four years, the money has stayed in Germany.

In 2013, nearly €527 million was transferred back to Greece and around €387 to the ESM in 2014, with Germany receiving €2.5 billion in overall profit. Moreover, the state bank KfW managed to get interest profits of €400 million from the loan.

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Russia gets rid of US Treasury securities and buys gold

The political standoff started in 2014, shortly after the conflict in Ukraine and the referendum in Crimea in favor of joining Russia. Several rounds of US sanctions followed, with the latest affecting major Russian companies and individuals who run them.

Russia dumped US treasuries to keep reserves safe – central bank

In April, Russia sold half of its US sovereign debt bonds, getting rid of nearly $47 billion worth of securities, according to US Treasury data released last week. The sell-off is a signal that Russia’s financial regulators are diversifying the country’s foreign exchange reserves, say analysts at the Copenhagen-based Danske Bank.

“Some people ask whether the Russian Central Bank sold them to support the ruble in April, but it’s about changing allocation as reserves continue to grow,” Vladimir Miklashevsky, a senior economist at Danske Bank in Helsinki, told Bloomberg. “Rising US yields have fueled the sell-off.”

Russia sold more than any other major foreign holder of US debt – even as its reserves grew on the back of rising oil prices. The country’s current stake shrank by nearly four times against the hefty holding of more than $176 billion eight years ago.

According to the Central Bank of Russia (CBR), the country’s top controller of foreign exchange reserves, all kinds of risks, including financial, economic and geopolitical are factored when the reserves are allocated. “We pursue the policy of safe and diversified holdings,” CBR Governor Elvira Nabiullina said, commenting on the issue.

Meanwhile, Russia’s gold holdings have been steadily increasing, bringing its share of the precious metal to its highest level in nearly two decades. Last month, Russia’s gold holdings grew by one percent to 62 million troy ounces, worth $80.5 billion, according to the CBR. In May, Nabiullina said gold purchases helped to diversify reserves.

Russia fell to 22nd place on a list of major foreign holders of US securities. Moscow’s big sell-off reportedly was not so crucial for the $14.9-trillion US Treasuries market. A bigger question is what happens to the US securities market if China decides to follow suit and pull out its $1.18 trillion holding.

“China could do the same if the trade war gets too bad,” Danske Bank’s Miklashevsky said. “That tool has been used before. In Russia, it’s more about keeping the money safe from sanctions because they need it for a rainy day.”

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Bavaria rejects Angela Merkel’s plan of paying out more money for eurozone

Soros: EU facing major financial crisis, but I’ve a plan to save Europe

The move takes aim at Chancellor Angela Merkel’s agreement with France this week, as the German leader seeks to create a budget for the eurozone to strengthen the economic convergence of the bloc.

“One thing is clear: We need stability in Europe not by always paying out more money but rather through reforms in the respective countries,” Soeder said Thursday. Soeder is a senior figure among Merkel’s conservative Bavarian allies.

“We don’t want a community of debt,” he added. “It can’t be that European finance instruments are developed for example to further save Italian banks. That should be dealt with in Italy. These are things that must be talked about.”

According to Soeder, Bavaria is against the eurozone budget because “it’s a form of additional budget”. “Is it separate from German lawmakers? Does it mean that the fundamental stability of the euro will be challenged? All that must be clarified,” he said.

On Tuesday, Merkel said she was hopeful that parliament would back the creation of the eurozone budget. But on Wednesday, her conservative bloc in the Bundestag said larger financial contributions to the eurozone are inadmissible and criticized her proposal.

Soeder’s words come at the time when the Bavarian party and Merkel are in a deepened rift over her liberal refugee policy that has allowed more than a million asylum seekers to enter Germany since 2015.

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Tit-for-tat: World responds to Trump’s tariffs with levies on US goods

The Chinese commerce ministry said the country is “fully prepared” to hit back against any protective steps Washington may potentially take. The response comes as US President Donald Trump threatened Beijing with another $200 billion in tariffs in addition to the $50 billion already imposed.

In the meantime, India increased import tariffs on a number of goods worth $240 million in response to US levies on steel and aluminum exports shipped from the South Asian nation. The 70 percent tariffs targeting chickpeas will come into effect on August 4.

Trump’s trade tariffs pushing Europe closer to China Russia

In March, Washington imposed an import tax of 25 percent on steel and 10 percent on aluminum from China and several other nations, including Russia, India, Japan and Turkey. At end of the last month, the measure was extended to the EU, Canada and Mexico, which were initially exempted.

Echoing the tit-for-tat steps taken by India and China, Turkey’s Ministry of Economy announced tariffs worth $267 million on US imports, as talks with Washington failed to achieve any progress. The list includes such products as coal, paper, walnuts, tobacco, rice, whiskey and cars.

“Turkey is committed to active, robust and reciprocal trade relations with the US — but with the understanding that fairness cannot be one-sided,” the country’s Economy Minister Nihat Zeybekci said. “We cannot and will not allow Turkey to be wrongly blamed for America’s economic challenges.”

On Wednesday, the European Commission said that it approved initial retaliatory tariffs on US goods worth $3.2 billion. The primary list includes motorcycles, motor boats, orange juice, bourbon, peanut butter, cigarettes and denim. The second batch of US exports worth around $4.3 billion will become the next target for tariffs, if the heated trade dispute continues.

“We did not want to be in this position,” EU trade official Cecilia Malmstrom said, commenting on the decision. “The unilateral and unjustified decision of the US to impose steel and aluminum tariffs on the EU means that we are left with no other choice.”

Earlier this week, Russian economy ministry pledged to retaliate against Washington’s unilaterally imposed steel and aluminum tariffs. Last month, Russia informed the World Trade Organization (WTO) about possible retaliatory measures in the amount of $538 million – exactly the same sum the country is going to lose due to US levies.

“The US continues to apply protective measures by imposing additional import duties on steel and aluminum, and refuses to provide compensation for Russia’s losses. That is why Russia is using its WTO rights and introducing balancing measures with respect to imports from the United States,” Economic Development Minister Maksim Oreshkin said on Tuesday.

Last month, Japan’s Foreign Ministry announced plans to impose tariffs on US goods worth $451 million — equivalent to the impact of US levies recently imposed on Japanese metal products.

India and the EU also opened a WTO dispute over the US measures that are seen as protectionist. In accordance with the trade body’s regulations, safeguard measures should trigger payments from the US to major exporters. China followed suit, having addressed the WTO with its objections, while Turkey pledged to take the similar step in the near future, according to the economy minister.

Topping it off, US neighbors Canada and Mexico also vowed to strike back at the metal tariffs, accusing the US of protectionism. Canada said it would tax US imports of steel, aluminum and such goods as whiskey, orange juice and other food products, while Mexico is planning to impose levies on US flat steel, pork, sausages and food preparations, apples, grapes, cranberries and various cheeses.

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Russia prepares for production of iconic Soviet-era megaplane

Not Ukraine’s property: Russia’s plan to revive huge Soviet-era aircraft irks Kiev

Earlier this month, Russia said it will resume the production of the Antonov An-124 jet, which is still one of the world’s heaviest cargo airplanes.

The Antonov Design Bureau was established in 1946 in the Russian city of Novosibirsk. In 1952, the company was relocated to Kiev and inherited by Ukraine after the collapse of the Soviet Union.

Ukrainian state-owned aircraft maker Antonov has said the construction of the jet without its participation is inadmissible since the company has all the rights and all the documentation for the aircraft.

Russia says it has the rights and the new aircraft will be significantly modified to meet the modern requirements and will likely come under a new brand. Now, Aviastar-SP is seeking a partner to evaluate its capability to rebuild the jet.

Russian officials have said the renewal of An-124 is a feasible task. “If we talk about the resumption of their production, this is an extremely difficult, but solvable task “, said Aleksey Rogozin, Vice-President for Transport Aviation of the United Aircraft Corporation (UAC).

The Antonov-124 can carry super-heavy and oversized cargo up to 120 tons across 4,500 kilometers at a height of up to 10,000 meters. The jet completed its maiden flight in December 1982 and entered service in January 1986. The aircraft is 36m long and 4.4m high; it can operate under 60°C below zero and 45°C above zero.

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China can hurt America in trade war six ways from Sunday

After numerous threats to tax Chinese imports, US President Donald Trump fired the first shot by approving $50 billion in tariffs that will come into force on July 6. Beijing immediately responded by imposing a 25-percent tariff on American imports worth $34 billion, which will come into effect on the same day.

China cuts US investments by 92% amid escalating trade war

Trump issued a threat to impose additional 10-percent levies on $200 billion of Chinese goods coming to the US. This prompted a pledge from China’s Commerce Ministry to “forcefully fight back” with “qualitative” and “quantitative” measures.

The mutual exchange came two months after the White House slapped China and several other nations, including Russia and India, with an import tax of 25 percent on steel and 10 percent on aluminum. In late May, the measure was extended to the EU, Canada and Mexico.

Now that everyone’s cards are on the table, the question is what else China can do to protect itself and minimize damages in this fierce fight between the world’s two largest economies. Let’s explore the possibilities.

Cutting US investments

Chinese corporations have significantly decreased their investments in the US amid the mounting spat, reports Rhodium Group, a research provider that tracks Chinese foreign investment. The reported plunge totaled 92 percent within the first five months of this year.

China became America’s strategic partner at the end of the last century as part of a US plan to undermine the Soviet Union. This had involved enormous efforts by Washington dating back to the Nixon administration.

In the early 2000s, however, the George W. Bush administration turned Beijing from a strategic partner into a strategic rival. Chinese companies invested heavily in the US, but Washington’s tougher stance on imports and with US regulators derailing major deals, Chinese investments have been drying up.

Further tariffs on US imports

Beijing could escalate tariff hikes on more American products. While analysts agree that no one would emerge as a winner from the conflict, Beijing says it’s willing to take pain in order to protect its interests. If the trade war escalates, major American corporations would be damaged. China is already targeting American products from states that backed Donald Trump during his presidential campaign. So far, Beijing has taxed American fruit, nuts, pork, wine, soybeans, corn, wheat, rice, sorghum, beef, poultry, fish, dairy products, alfalfa, and vegetables. But Apple and Boeing could be the next targets.

Rejecting US oil and gas

China, the world’s biggest energy consumer, has become one of the key purchasers of US oil since Washington allowed its producers to sell crude abroad after a 40-year ban. At the same time, China is set to become the world’s largest buyer of liquefied natural gas (LNG) in the next decade. Beijing has pledged to announce additional duties on the remaining $16 billion of US goods, including crude oil, LPG, gasoline, naphtha, fuel oil and natural gas.

READ MORE: Yuan going global as China boasts largest foreign reserves infrastructure megaprojects

China has been the largest Asian buyer of US crude, with its market share rising to 3.5 percent in the first quarter from 0.4 percent over the same period a year ago, according to SP Global Platts. China accounted for 23 percent of total US crude exports in March, data from the Energy Information Administration reveals. “LPG is expected to face the second biggest impact” Platts said in an emailed report, citing US supplies that accounted for 22.4 percent of China’s total propane imports in the first quarter.

Although LNG is not on the list yet, Beijing might introduce additional tariffs on some of its energy imports from the US, and decrease purchases or completely stop buying oil and gas from the US altogether.

Yuan devaluation

A weaker national currency would help China to boost trade competitiveness. Beijing might relax capital control measures, which have helped the country’s authorities to strengthen the renminbi over the past two years. The step would help the country’s exports.

“One would imagine that China will be thinking about currency devaluation again. The yuan doesn’t trade freely, and analysts are often left wondering what the People’s Bank of China has in mind for the currency,” said Rabobank’s senior Asia-Pacific strategist Michael Every, as quoted by Market Watch. “Devaluation is one of Beijing’s most powerful economic tools.”

Dumping treasuries

As a tit-for-tat response, the Chinese government might use the ‘nuclear option’ and take aim at the largest American import – government debt. China held some $1.18 trillion of US treasuries as of the end of April, making it the largest of America’s foreign creditors and the second overall owner of US government bonds after the Federal Reserve. Dumping those holdings could drive bond yields higher and make it more costly to finance the federal government. The step would have a major negative impact on US finances and global investors.

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South Korea wants railroad link to Russia through North Korea

Russia in talks to build gas pipeline uniting the Korean Peninsula

One such project could be a railway that will be able deliver goods from Russia to South Korea through North Korea. “Once the Trans-Korean Main Line is built, it may be connected to the Trans-Siberian Railway. In this case, it will be possible to deliver goods from South Korea to Europe, which would be economically beneficial not only to South and North Korea but to Russia as well,” Moon Jae-in said in an interview with Russian media ahead of his state visit to Moscow.

A gas pipeline coming from Russia to North Korea to be extended to the South is another possibility, he said. “We can also build a gas pipeline via North Korea, so that not only South Korea will receive Russian gas but we will also be able to deliver it to Japan,” the South Korean president said.

The project to unite the Korean Peninsula with a gas pipeline has been discussed for a long time, but official talks started in 2011. The negotiations were frozen after relations between Seoul and Pyongyang deteriorated. Last week, Russian energy major Gazprom announced it resumed talks with Seoul over the construction of a gas pipeline connecting Russia with North and South Korea.

The countries could also connect their electricity grids, Moon Jae-in said. “We can also establish a powerline that would allow us to receive electricity from Russia. It could also be delivered not only to South and North Korea but also to Japan.”

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